House flipping can be a challenging but financially rewarding endeavor. It's also a good way to break into real estate investing. And if you enjoy getting your hands dirty, it could actually be an enjoyable experience.
But if you're going to start flipping houses, you'll need to steer clear of the pitfalls so many people in your shoes fall victim to. Here are a few house-flipping myths you just can't afford to buy into.
1. House flipping is easy
Sure, it's a piece of cake -- if you have a skilled crew, all the right tools and materials, and are working with a home that's in reasonably good shape to begin with. But if you're buying a home with structural damage, plumbing issues, and wiring that isn't up to code, expect to spend a lot of time -- and money -- getting that home into shape.
Even if your house flip is more cosmetic in nature, remember that if you're new to the process, you may run into more issues than expected. Certain updates may require permits, for example, which could slow down the process. And that leads to our next point.
2. House flipping is a quick way to make money
House flips don't tend to happen overnight. Even if the work involved gets done pretty quickly, you still need to list the home, wait for offers, and negotiate with buyers. All told, you could end up waiting months from the time your renovations are complete to unload your newly flipped home and see a return on your investment. Be mindful of that as you attempt to manage your cash flow.
3. Your best bet is to flip foreclosed homes
Foreclosures can often be purchased on the cheap, but that doesn't mean a foreclosure is the right choice for your house flip. Foreclosed homes are often left in a state of neglect and tend to have hidden problems that may not be obvious until you really start your renovation work. While you can certainly look at foreclosures, don't limit yourself to them.
4. The only way to make money flipping houses is to find a buyer
Most people who get into the house-flipping business aim to buy a property on the cheap, fix it up, and sell it quickly at a profit. But that's not your only option. If you're having trouble finding a buyer, you could also convert your newly flipped home to a rental property and use that income to tide yourself over until the market opens up and buyer demand increases.
There's lots to learn about flipping houses, so if you're new to the game, start small. Buy a property that isn't a huge stretch for you financially, and set a renovation budget up front to avoid getting in over your head.
It's equally important to make sure to price your newly flipped home just right. Ask too much, and you may have a really hard time finding a buyer. The longer your flipped home sits on the market, the longer your investment dollars get tied up, so map out a solid financial plan before you get too deep into your house-flipping venture.